The Delhi High Court while upholding the ruling of the Income Tax Appellate Tribunal (ITAT) has directed the Assessing Officer (AO) to tax rental income under ‘income from house property’.
The bench of Justice Yashwant Varma and Justice Ravinder Dudeja has observed that the factory building owned by the assessee was let out to M/s Anand Engines Component Ltd., for which the assessee earned rental income of Rs. 47.26 lakhs. Whether there existed ‘leave and licence’ agreement and not ‘rental agreement’ would not change the colour of receipts in the hands of the assessee.
Background
The appellant-department, Principal Commissioner has challenged the order of the Income Tax Appellate Tribunal dated 04 July 2019. The ITAT has upheld the decision of the CIT(A) in deleting the disallowance under section 80IC of the Income Tax Act.
The tribunal has held that the Assessing Officer has not appreciated the underlying facts in issue in true perspective. Correct facts are that the manufacturing unit at Parwanoo, Himachal Pradesh was eligible for deduction under section 80IC of the Income Tax Act. The undertaking belongs to M/s Purolotor India Ltd.
The tribunal was of the opinion that the Assessing Officer proceeded by wrong assumption of facts that M/s Purolator India Ltd got amalgamated with M/s Mahle Filter Systems [India] Ltd whereas the fact of the matter is that Mahle Filter systems [India] Ltd was the transferor company and amalgamated with M/s Purolator India Ltd which was the transferee company by order of the High Court of Delhi in the matter of Scheme of Amalgamation of Company Petition No. 53/2008 connected with Company Application No. 172/2007. Subsequently, the name of M/s Purolator India Ltd was changed to M/s Mahle Filter Systems [India] Ltd.
The department submitted that the tribunal has ignored the fact that transaction was sham and purpose of following the circuitous route of first merging M/s Mahle Filter System (India) Ltd. with M/s Purolator India Ltd. and then changing the name of the company to M/s Mahle Filters Systems (India) Ltd. was to get the benefit of deduction under section 80IC of the Income Tax Act.
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Conclusion
The court while dismissing the department’s petition held that the assessee has earned rental income from letting out its property and the same has to be taxed under the head ‘income from house property’ eligible for deduction as per the provisions of section 24 of the Act.
The court directed the Assessing Officer to tax rental income under the head ‘income from house property’ as per provisions of law.
Case title: The Pr. Commissioner Of Income Tax V/S Mahle Filters Systems (India) Ltd
Citation: ITA 44/2020
Counsel for the Petitioner: Mr. Aseem Chawla
Counsel for the Respondent: Mr. Neeraj Jain
Decision Date: 11.09.2024
